Marketplace disruption

Retailers need to figure out how to serve the millennials

Retail
Retail

Toys R Us chief executive officer Dave Brandon called the retail landscape “increasingly challenging and rapidly changing” in a recent CNN interview. This turbulence in the retail landscape persists and more than likely will impact the Christmas 2017 holiday season.

Changes are occurring everywhere in the retail industry. As Amazon continues to hire additional staff in Kenosha for its distribution center, Bon-Ton is downsizing its flagship Boston Store location on Wisconsin Avenue, and the former Sears store at Bayshore Town Center is being demolished and replaced by Nordstrom Rack.

Kohl’s is reducing floor space in its stores to reduce selling costs. It also has added “Off Aisle” outlet stores to its retail arsenal. Full-line retailers that private label their merchandise continue to struggle to clear their racks of out-of-season and slow-selling merchandise, while the new giants of online retailing, like Amazon, Overstock.com, and eBay, continue to expand their product offerings.

This trend away from traditional retail channels of distribution is being fueled by the 92 million millennials and many of the 61 million members of Generation X. Goldman Sachs published a study of the three generations and how they interact with the retail environment. To the surprise of no one, the millennials are more than three times more active on social media than the baby boomers. More than half of these millennials compare prices online. Goldman Sachs has identified this generation as “digital natives” because their affinity for technology has shaped how they shop. Their active lifestyle influences trends in everything from food to fashion. They turn to online networks like Yelp, OpenTable and others for reviews on restaurants, hotels, physicians and other services. Traditional retailers have been playing catch-up with these online giants for several years and are still behind in building their share of this market.

The open question is, “How do we penetrate this market?” The answer is in understanding this generation’s behavior. As they enter their prime spending years, research shows millennials are more concerned with price than quality, and they are turning to the internet for product information and peer reviews – hence, the growth of Forever 21, H&M and other specialty retailers.

Recent store closures have reinforced research that has shown millennials are not brand loyal and these brands are shrinking in importance. Specialty retailers like Michael Kors, The Limited, Abercrombie & Fitch, Guess, BCBG Max Azria and American Apparel have either downsized or closed their stores. Traditional retailers like Macy’s, JCPenney and Kmart have closed many of their stores in 2017.

This Thanksgiving, many traditional retailers will be closed on the holiday, permitting their employees to spend the day with their families. Dillard’s in the South and Southwest, along with Nordstrom nationwide, the TJX group (T.J. Maxx, HomeGoods and Marshalls) and the Burlington stores will also be closed. Of course, they will be open on Black Friday and ready with the traditional “door busters” and special buys. If they wish to fight the crowds and long lines, the millennials will take an Uber or Lyft to the nearest store or mall and begin their seasonal shopping. If not, they will be sharing the internet with millions of other online shoppers sitting at home in their robes and slippers ordering their holiday fashions and gifts. After the holiday, instead of waiting in line to make a return, they will drop off their package at the local post office or UPS Store.

It is time retailers understand how the millennials think, behave and shop. Otherwise, more traditional retail stores will close, while online retailers and the TJX, Ross and Burlington groups will continue their double-digit sales growth.

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Cary Silverstein
He was a senior professor at DeVry's Keller Graduate School in Wisconsin. Cary has published articles in periodicals and on the Internet. He recently published first book with Dr. Larry Waldman, "Overcoming Your NegotiaPhobia". Cary holds MBAs from L I U’s Arthur T. Roth School of Business. Cary has a BA from CUNY, Queens College. He has certificates in Negotiation from Harvard’s PON and in Labor and Employment Law from Marquette University.